Finance Act 1996

The Finance Act 1994 (c. 9)

75 In section 160 of the Finance Act 1994 (treatment of non-trading profits and losses on interest rate and currency contracts), for subsections (2) to (4) there shall be substituted the following subsections—

“(2) Any amount which for the purposes of this section is treated as a non-trading profit of a company for any accounting period shall be brought into account for that accounting period as if it were a non-trading credit falling to be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 in respect of a loan relationship of the company.

(2A) Any amount which for the purposes of this section is treated as a non-trading loss of a company for any accounting period shall be brought into account for that accounting period as if it were a non-trading debit falling to be brought into account for the purposes of Chapter II of Part IV of the Finance Act 1996 in respect of a loan relationship of the company.”

76 (1) In subsection (9) of section 167 of that Act (factors to be taken into account when adjusting transactions not at arm’s length), before the word “and” at the end of paragraph (b) there shall be inserted the following paragraph—

“(ba) in a case where the qualifying contract is a debt contract or option, the amount of the debt by reference to which any loan relationship that would have been involved would have subsisted, and any terms as to repayment, redemption or interest that, in the case of that debt or any asset representing it, would have been involved;”.

(2) In paragraph (c) of that subsection, for “either” there shall be substituted “any such”.

77 In section 173(5)(a) of that Act (references to the purposes of the Chapter), for the words from “subsections (5)” to “losses)” there shall be substituted “Chapter II of Part IV of the Finance Act 1996 (loan relationships), so far as that Chapter is applied by virtue of section 160(2) or (2A) above,”.

78 (1) In subsection (1) of section 177 of that Act (interpretation)—

(a) in the definition of “commencement day”, after the words ““commencement day”” there shall be inserted “—

(a) for the purposes of this Chapter as it has effect in relation to any debt contract or option, means (subject to paragraph 25 of Schedule 15 to the Finance Act 1996) 1st April 1996; and

(b) for all other purposes”;

and

(b) after the definitions of “currency contract” and “currency option” there shall be inserted—

““debt contract” and “debt option” shall be construed in accordance with section 150A above;”.

(2) In subsection (2)(a) of that section (time when company becomes entitled to a contract), for “or a currency contract or option,” there shall be substituted “a currency contract or option or a debt contract or option”.

79 For paragraphs 1 and 2 of Schedule 18 to that Act (special provision with respect to financial instruments for insurance companies) there shall be substituted the following paragraphs—

“Application of insurance companies provisions relating to loan relationships

1 (1) Part I of Schedule 11 to the Finance Act 1996 (special provision with respect to loan relationships for insurance companies) shall have effect (subject to sub-paragraph (2) below) in relation to qualifying contracts as it has effect in relation to loan relationships which are creditor relationships within the meaning of Chapter II of Part IV of that Act.

(2) That Part of that Schedule shall have effect in its application in relation to qualifying contracts, as if—

(a) references to section 82(2) of the Finance Act 1996 were references to section 159 of this Act, and

(b) references to credits and debits given by Chapter II of Part IV of that Act in respect of a loan relationship were references, respectively, to the profits and losses deriving from the contract.

1A (1) Where the I minus E basis is applied for any accounting period in respect of the life assurance business or capital redemption business of any insurance company, this Chapter shall have effect for that period in relation to contracts and options held for the purposes of that business as if the words in subsection (10) of section 150A from “but references” onwards were omitted.

(2) Expressions used in sub-paragraph (1) above and in Part I of Schedule 11 to the Finance Act 1996 have the same meanings in this paragraph as in that Part of that Schedule.”